Earlier this week, the Office of Compliance Inspections and Examinations (OCIE) of the U.S. Securities and Exchange Commission (SEC) issued a new Risk Alert (available here) related to the use of outsourced chief compliance officers (CCOs) by SEC-registered investment advisers and investment companies (Registrants). The Risk Alert shares staff observations of Registrants who outsource their CCO functions to unaffiliated third-parties resulting from nearly 20 examinations under OCIE’s Outsourced CCO Initiative. The Risk Alert identified a number of key concepts that should be considered by Registrants.

First, Registrants with outsourced CCOs should review their business practices in light of the risks highlighted by the staff and the Registrant’s responsibilities under applicable compliance rules. The Risk Alert emphasizes that Registrants not only must assure that outside CCOs have the requisite knowledge and experience to carry out the responsibilities of a CCO, they should also have the authority and access to the organization needed to accomplish their duties.
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